A Capstone Project is an assignment designed specifically to apply and showcase the skills you learned in the Specialization. To this end, the Business Strategy Capstone Project, a comprehensive Strategic Analysis, provides an opportunity for you to synthesize concepts and knowledge from the four prerequisite courses in the specialization. You may continue with the organization you selected for previous assignments or select a new organization for this project. You will analyze the current state of the organization, strategic issues facing the organization, strategic paths the organization might pursue, make a recommendation of the best path for the organization to pursue, and write an Executive Summary. Your finished project will serve as an artifact showcasing your ability to conduct research on/within an organization, select and apply the most appropriate analytical tools, build a well-supported case for a specific position, and effectively communicate key points with executive leadership.

Taught By

Michael Lenox

Jared Harris

Transcript

So let's discuss real options analysis, another tool in your Strategist's Toolkit. Real options analysis actually has its roots in the area of finance, but has been used by many strategists as they think through various capital budgeting decisions. The idea of a real option is the idea that there is value in having optionality. What do I mean by that? Considering two investments that you might make. One is an all in investment. You're going to invest in a new product and you have no opportunity to pull back from that investment once it's made. The second is staged. And there are opportunities as you go through that development process to cut-off those investments. The latter creates optionality. The latter creates a value because now you don't have to be all in with those expenditures. Real options analysis, in its technical way, is a way of calculating that actual optionality that is created by a stage gate process. Now we can go through the specifics of how to calculate a real option, but for our our brief note here, I'll just talk it more conceptually. The idea very simply again, is if you can imagine an investment opportunity, like R&D or innovation where you might abandon or develop a project or a product. At various points in that development process, you might collect additional data and then make a decision whether to continue or not. So as you in this little decision tree here, there are various decision points in which you can abandon the product versus continue to commercialize it and develop it. That again, that value in having the ability to stage, gives you optionality value. So it's often useful when thinking about innovation or even other capital investments, to think about to what degree is there optionality provided. To what degree could I stop investment at a point in time. So when you think about something like a merger and acquisition that tends to be an all in types of investment there as opposed to internally developing some product or service, at which point you might be able to learn some and cut back at a future date. This is the underlying logic of a Real Options Analysis. And again, one can get quite technical and try to calculate those, but one could also just simply use that as a decision logic when thinking about whether one choice or one decision is better than another.

Explore our Catalog

Join for free and get personalized recommendations, updates and offers.